Enbridge Q4 Earnings on Deck: Should You Buy Now or Wait?
Enbridge Inc ENB is set to report fourth-quarter 2024 results on Feb. 14, before the opening bell.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 52 cents per share, implying an improvement of 10.6% from the year-ago reported number. Two analysts revised the estimates upward in the past 30 days against one downward movement. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $4.8 billion, suggesting a decline of 42.9% from the year-ago actuals.
ENB beat the consensus estimate for earnings in one of the trailing four quarters, met once and missed the same twice, with the average surprise being 0.7%. This is depicted in the graph below:
Q4 Earnings Whispers
Our proven model predicts an earnings beat for ENB this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is the case here.
The leading midstream energy player has an Earnings ESP of +0.41%. This is because the Most Accurate Estimate currently stands at 53 cents per share, higher than the Zacks Consensus Estimate. EPD currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping Q4 Results
Enbridge is a leading midstream energy player in North America, operating an extensive crude oil and liquids transportation network spanning 18,085 miles — the world's longest and most complex system. ENB’s gas transportation pipeline network spans 71,308 miles, covering 31 U.S. states, four Canadian provinces and offshore areas in the Gulf of Mexico.
Notably, Enbridge’s pipelines transport 20% of the total natural gas consumed in the United States. The company is likely to have generated stable, fee-based revenues from these midstream assets in the quarter, as they are booked by shippers on a long-term basis, minimizing commodity price volatility and volume risks.
Price Performance & Valuation
ENB's stock has gained 41.6% over the past year compared with a 48.6% improvement of the industry’s composite stocks.
One-Year Price Chart
Although the stock underperformed the composite stocks, it appears relatively overvalued. The company's current trailing 12-month enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio is 17.35, which is trading at a premium compared to the industry average of 14.70 and is higher than other major midstream companies such as Kinder Morgan Inc. KMI and Enterprise Products Partners LP EPD, which are trading at 13.65x and 10.48x EV/EBITDA, respectively.
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ENB’s Investment Thesis
The midstream energy major secured incremental cash flows from its C$27 billion backlog of secured capital projects, which include liquids pipelines, gas transmission, gas distribution and storage, and renewables. The maximum in-service date is 2029. Considering its substantial backlog of midstream growth projects, it is expected that Enbridge will continue rewarding shareholders with attractive dividend payments.
However, ENB operates under significant regulatory scrutiny due to its extensive fossil fuel infrastructure, which faces increasing environmental regulations???. Also, Enbridge, a major player in the midstream energy sector, carries a high level of debt, with exposure to debt capital considerably higher than the industry average. This situation presents considerable financial risks.
Last Word
While ENB offers promising long-term potential with incremental fee-based revenues, investors may benefit from waiting for a better entry point due to its current overvaluation. Those already holding the stock are advised to maintain their position.
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